Can you keep your house if you file bankruptcy?
“If I file for bankruptcy, what happens to my house?”is one of the most common questions people ask when they are considering bankruptcy as an option. Although individual situations vary, in most cases you are able to keep your home when filing for a bankruptcy, but only on certain conditions. Canadian bankruptcy legislation states that a secured lender (mortgage holder) is not authorized to cancel your mortgage solely because you have filed for a bankruptcy. While undergoing a bankruptcy, you are still permitted to continue to pay your mortgage as long as you are up to date with your payments.
What happens if you are behind on your mortgage payments?
If you are behind on your mortgage payments, or are in arrears, the secured lender (the mortgage holder) is not obligated to allow you to still hold a mortgage with them. This being said, even if you do not file a bankruptcy and your mortgage is in arrears or you are behind on your mortgage payments, the secured lender can still start the foreclosure procedure for the sale of your home.
How does owning a home affect a bankruptcy?
It is not necessarily owning a home that affects a bankruptcy, but rather the amount of equity held in the home. Equity is defined as the amount of profit you would receive if you sell your house.
For example, if you have a home that has a current market value of $300,000, and your outstanding mortgage balance owing is $200,000, your home would hold approximately $80,500 worth of equity after real estate fees and taxes have been subtracted.
If you choose to file for a bankruptcy and would like to keep your home, it is required that you pay your trustee the amount of equity you hold in your home. Therefore, if you have paid a significant portion of your mortgage, a bankruptcy might not be the best option for you.
Will I lose my car if I file bankruptcy?
It’s very unlikely you would lose your vehicle if you file for bankruptcy, but it is not impossible. Two questions a trustee will ask to be sure you will not lose your vehicle are:
The worth of your vehicle
– This is obtained through an appraisal and is used to calculate the equity held in your vehicle.
If your car has a loan, lease, or owned outright.
– If your car has a loan or is leased, it is considered to have a secured debt, or lien, on it. This means that as long as you are up to date on your vehicle payments, a bankruptcy will not cause you to lose your vehicle.
Both of these variables play into calculating the equity held in your vehicle. Even if you hold equity in your vehicle, there are ways to keep your vehicle, such as paying out the equity to your trustee, but these are largely based on the individual case.